Determinants of job satisfaction:

A European comparison of self-

employed and paid employees

José María Millán Jolanda Hessels Roy Thurik Rafael Aguado

Zoetermeer, May 2011

This research has been partly financed by SCALES, SCientific Analysis of Entrepreneurship and SMEs (www.entrepreneurship-sme.eu)

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EIM Research Reports

reference number H201106

publication May 2011

number of pages 25

email address corresponding author joh@eim.nl

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3

Determinants of job satisfaction: A European comparison of self-

employed and paid employees

José María Millán

A, Jolanda Hessels

B, C,

Roy Thurik B, C, D

, Rafael Aguado A

A Department of Economics, University of Huelva, Spain

B EIM Business and Policy Research, The Netherlands

C Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands

D GSCM-Montpellier Business School, France

Abstract: Job satisfaction of self-employed and paid employed workers is analyzed using the European

Community Household Panel for the EU-15 covering the years 1994-2001. We distinguish between

two types of job satisfaction: job satisfaction in terms of type of work and job satisfaction in terms of

job security. Findings from our generalized ordered logit regressions indicate that self-employed

individuals as compared to paid employees are more likely to be satisfied with their present jobs in

terms of type of work and less likely to be satisfied in terms of job security. The findings also provide

many insights into the determinants of the two types of job satisfaction for both the self-employed and

paid employees.

First version: January 2011

This version: May 2011

Keywords: entrepreneurship, self-employment, job satisfaction, Europe

JEL-classification: J24, J28, L26, O52

Document: Millan_Hessels_Thurik_Aguado_INBAM_V21

Save date: 5/31/2011 5:43 PM

Correspondence: Jolanda Hessels, joh@eim.nl

Acknowledgement: The paper has been written in the framework of the research program SCALES

carried out by EIM Business and Policy Research and financed by the Dutch Ministry of Economic

Affairs, Agriculture and Innovation. This work has also benefited from financial support by the

Spanish Ministry of Education (Programa Nacional de Movilidad de Recursos Humanos, Plan

Nacional de I+D+i 2008-2011). Andrew Burke, Gavin Reid and Concepción Román provided useful

comments.

4

1. INTRODUCTION Entrepreneurship as an occupational choice has been widely investigated. The choice between

entrepreneurship (i.e., self-employment) and wage-employment is found to be influenced by a broad

range of factors including demographics, educational typology, labor market issues, (expected)

financial and (expected) non-financial benefits (Grilo and Thurik, 2008; Parker, 2009). Recent studies

emphasize that job satisfaction may be an important determinant of the choice between self- and

wage-employment (Taylor, 1996, 1999; Blanchflower, 2000, 2004; Georgellis, Sessions and

Tsitsianis, 2007).

A different body of research has identified various positive effects of job satisfaction on individual and

organizational performance. For example, that there are quantifiable positive links between job

satisfaction and organizational effectiveness (Ostroff, 1992; Koys, 2001), individual performance

(Sousa-Poza and Sousa-Poza, 2000), employee turnover (Ryan, Schmitt and Johnson, 1996), customer

satisfaction (Roger, Clow and Kash, 1994; Ryan, Schmitt and Johnson, 1996; Brown and Lam, 2008),

achievement orientation (Lusch and Serpkenci, 1990) and lower absenteeism (Vroom, 1964).

Therefore, job satisfaction is not only a determining factor of occupational choice, but may also

contribute to a firm’s competitiveness, productivity and growth potential. Hence it is important to

investigate its determinants. This is not a new line of research. For many years labor economists have

been interested in the determinants of job satisfaction (Clark, 1996; Hamermesh, 1977; Freeman,

1978; Borjas, 1979; Meng, 1990; Clark and Oswald, 1994; Blanchflower and Oswald, 1998) while

others have focused on job satisfaction in relation to self-employment (Blanchflower and Oswald,

1998; Blanchflower, 2000; Hundley, 2001; Benz and Frey, 2004, 2008; Noorderhaven, Thurik,

Wennekers and Van Stel, 2004). A consistent finding is that the self-employed tend to have higher

levels of job satisfaction than employees.

Nevertheless, studies comparing job satisfaction between self-employed and paid employed suffer

from two shortcomings. First, like most studies explaining job satisfaction, they have failed to take

into account that job satisfaction is a heterogeneous phenomenon. Self-reported job satisfaction may

reflect satisfaction with both financial and non-financial benefits and different people can mean

different things when they evaluate the extent of satisfaction with their job (Muñoz de Bustillo-

Llorente and Fernández-Macías, 2005; Bianchi, 2010). For example, if one states to be satisfied with

one’s job, this may reflect satisfaction with its content or with the number of hours required to do the

job or with both aspects. While some individuals may place a high or low value on some specific job-

related aspects, which may influence their overall assessment of job satisfaction, for others it will

comprise an evaluation of several different aspects. Therefore, it is difficult to assess what is actually

measured when asking individuals to evaluate overall satisfaction with their jobs. Consequently, there

is a lack of understanding of what job satisfaction refers to and how, ultimately, it can be influenced

by employers and policy makers. In the present study we take an initial step in overcoming this

problem by making a distinction between two types of job satisfaction, i.e. job satisfaction with the

type of work and job satisfaction with job security. Second, studies comparing job satisfaction between

self-employed and paid employed lack wide empirical coverage.

Simultaneously addressing these aspects of the existing literature is precisely the main aim of this

work—that is, comparing self-reported levels of job satisfaction in terms of type of work and job

security among self-employed individuals and paid employees by using survey data of 15 European

countries for the 1994-2001 period and a large range of explanatory variables.

Since autonomy and independence are common motives for becoming self-employed, one would

expect that the self-employed have more freedom in determining their type of work and are therefore

more likely than employees to be satisfied with their jobs as far as the type of work is concerned.

However, with respect to job security, self-employment can be considered more risky than paid

employment, as the risk of business failure can be expected to be higher than the risk of

unemployment. Furthermore, self-employment tends to be associated with lower levels of social

5

security protection. Therefore, self-employed individuals are expected to be less satisfied than paid

employees in terms of job security.

Next, by running separate estimations both for the self-employed and employees, we also investigate

the many determinants of job satisfaction in terms of the type of work and job security. This allows us

to determine whether determinants of the two types of job satisfaction differ between the self-

employed and paid employees.

The remainder of this paper is structured as follows: the literature background is dealt with in section

2. In this section we also develop two propositions. Section 3 provides a description of our unique

European dataset, the European Community Household Panel, the variables and the methodology.

Results are presented in section 4. Section 5 concludes and provides some further discussions.

2. RELATED LITERATURE Occupational choice refers to the choice to engage in self-employment or wage-employment

(Kihlstrom and Laffont, 1979; Evans and Jovanovic, 1989). Many factors affect an individual’s

decision to become self-employed (Grilo and Thurik, 2008; Parker, 2009). Next to demographic

factors, educational attainment and labor market experience, this decision may be influenced by

financial considerations such as expected income and profits, and income variability as well as non-

financial considerations such as autonomy, prestige and job satisfaction (Acemoglu, 1995; Van Praag,

1999). Verheul, Wennekers, Audretsch and Thurik (2002) view occupational choice decisions as being

made on the basis of an assessment of the potential risks and rewards of both employment options.

Individuals compare both the (expected) financial and non-financial risks and rewards of the

alternatives. In their assessment, individuals take into account environmental factors (opportunities

and opportunity costs) as well as their individual characteristics (means, skills and preferences).

Work may provide both economic and non-economic utility (Benz and Frey, 2008). Self-employment

is often associated with lower levels of economic utility than wage employment (Hamilton, 2000; Van

Praag and Versloot, 2007). The income of the self-employed also tends to be more variable than the

income of paid employees (Van Praag and Versloot, 2007). This leads to the idea that the self-

employed are able to obtain greater non-financial benefits as compared to the wage-employed such as

greater independence or satisfaction (Van Praag and Versloot, 2007; Bianchi, 2008). One indicator of

non-financial utility that has received considerable attention in previous studies is job satisfaction.

Job satisfaction broadly refers to the degree to which people like their work and is usually determined

by self-reported information. Economists tend to avoid data based on subjective feelings like job

satisfaction. Due to this subjective nature and the problem of making interpersonal comparisons it may

be difficult for researchers to interpret responses to questions on job satisfaction. The economic

literature that investigates the relationship between satisfaction and self-employment, however, has

yielded consistent results across data sets, which provides confidence with respect to the reliability of

job satisfaction data (Blanchflower and Oswald, 1998; Blanchflower, 2000). Furthermore, there are

several reasons why it is important to analyze a subjective indicator like job satisfaction. It is often

argued, people who are satisfied with their work perform better (Sousa-Poza and Sousa-Poza, 2000).

Previous studies suggest both a direct as well as an indirect link between job satisfaction and

organizational performance. For example, there is evidence of positive indirect linkages of satisfaction

with organizational effectiveness (Ostroff, 1992; Koys, 2001) and employee turnover (Ryan, Schmit

and Johnson, 1996). Indirect linkages of satisfaction with performance are suggested through a direct

positive relationship between job satisfaction and customer satisfaction (Rogers, Clow and Kash,

1994; Ryan, Schmit and Johnson, 1996; Brown and Lam, 2008); a positive link of satisfaction with

achievement orientation (Lusch and Serpkenci, 1990); and the observation that low satisfaction leads

to higher absenteeism (Vroom, 1964), job separations and quits (Akerlof, Rose and Yellen, 1988;

Clark, Georgellis and Sanfey, 1998; Clark, 2001). Thus job satisfaction can be considered an

important factor in improving a firm’s competitiveness. Against this background we have witnessed an

increased interest of economists in subjective aspects of well-being at work (Sousa-Poza and Sousa-

Poza, 2000).

6

Previous studies on job satisfaction have focused on analyzing various aspects in relation to employees

(Clark, 1996, 1997; Clark and Oswald, 1996; Sousa-Poza and Sousa-Poza, 2000). Furthermore,

several studies have included the self-employed in the analysis of job satisfaction. A consistent finding

is that the self-employed have higher levels of job satisfaction than employees (Blanchflower and

Oswald, 1998; Blanchflower, 2000; Blanchflower, Oswald and Stutzer, 2001; Parasuraman and

Simmers, 2001; Benz and Frey, 2004, 2008; Bradley and Roberts, 2004). In other words, individuals

who are self-employed tend to be more satisfied with their jobs than individuals who work as

employees. This is attributed in large part to the strong perception of independence of the self-

employed (Hyytinen and Ruuskanen, 2006). It has been emphasized that job satisfaction is an

important determinant of the choice between self- and wage-employment (Taylor, 1996; Blanchflower

2000, 2004) and a strong predictor of self-employment exits (Georgellis, Sessions and Tsitsianis,

2007). Job dissatisfaction has also been found to be a factor that pushes employees into self-

employment, because individuals who are dissatisfied with their jobs are more likely to seek

alternatives to being paid employees (Brockhaus, 1980).

Job satisfaction may refer to financial and/or non-financial benefits and different people can mean

different things when they evaluate it. Previous studies have generally failed to consider this

heterogeneity. While previous studies usually do not take the heterogeneity of job satisfaction into

account, some studies have considered different job aspects such as (satisfaction with) job security and

type of work as determinants of overall job satisfaction in comparing the self-employed with

employees (Taylor, 1996; Green and Tsitsianis, 2005; Benz and Frey, 2008). Such work-related

aspects are found to contribute to overall job satisfaction of workers (Green and Tsitsianis, 2005; Benz

and Frey, 2008). Also, it is observed that people who place high value on job security prefer paid

employment over self-employment, while the reverse is true for people who are attracted to a certain

occupation by the type of work (Taylor, 1996). However, these studies provide no insight into the

determinants of different types of job satisfaction. We are familiar with one study that analyzes some

determinants of several types of job satisfaction among employees (Origo and Pagani, 2009), but this

study does not include the self-employed. Hence it is not possible to compare the two groups of

workers.

Precisely to fill this research gap, the current study distinguishes between two types of job satisfaction

with the type of work and with job security and compares self-reported levels of these two types of job

satisfaction among the self-employed and paid employees. Since being your own boss provides

autonomy and independence, one would expect that the self-employed have more freedom in

determining the type of work. This leads to our first proposition:

Proposition 1: The self-employed are more satisfied than paid employees with their present job in

terms of type of work.

However, job security can be expected to be lower for the self-employed as compared to employees.

The self-employed tend to have lower social security or employment protection (European

Commission, 2004). Also, for self-employed individuals the risk of failure is quite high, in particular

in the start-up phase. Approximately 50 to 60 percent of new business start-ups survive the first three

years of activity (Eurostat, 2004). The risk of business failure is much higher than the risk of

becoming unemployed. Therefore, our second proposition is:

Proposition 2: The self-employed are less satisfied than paid employees with their present job in

terms of job security

The main objective of this paper is to test the validity of these propositions. In addition, we explore

whether the two types of job satisfaction have different determinants comparing the self-employed and

employees. We will not make an a priori list of additional propositions given the large number of

determinants we investigate.

7

3. DATA, METHODOLOGY AND VARIABLES Data source and sample

Data source. We use data from the European Community Household Panel (ECHP) covering the

period 1994-2001.1 The ECHP is a standardized multi-purpose annual longitudinal survey carried out

at the level of the EU-15.2 It is designed and coordinated by the Statistical Office of the European

Communities (Eurostat).The target population of the ECHP consists of people living in private

households throughout the national territory of each country. The definition of household is based on

the standard criteria of “sharing the same dwelling” and “common living arrangements”. Individuals in

the sample who move or join a new household are followed up at their new location. Lastly, the survey

also covers all persons cohabiting with any of the original sample persons in the same household.

These rules are followed to reflect the demographic changes in the population and to maintain the

panels’ cross-sectional representativeness of the population.3

Each year all members of the selected households in the participating countries are interviewed about

issues relating to demographics, labor market characteristics, income and living conditions. The same

questionnaire is used in all countries, which makes the information directly comparable. The first

wave of data collection was held in 1994. We have information on 60,500 nationally representative

households, i.e. approximately 130,000 individuals aged 16 years and older, for the entire period

1994-2001.

Our sample. To construct our sample, we first categorize individuals in the ECHP according to their

labor market status, that is (I) paid employment, (II) self-employment, (III) education or training, (IV)

unemployment, (V) unpaid employment, and (VI) inactivity. In a next step, we limit our sample to

include only men and women aged 18 to 65 working either part-time or full-time in any business

sector either as paid employees or self-employed.4 Workers in the public sector are excluded from our

analysis for comparability purposes between paid and self-employed individual.5 In a final step, we

removed observations with missing data for any of the variables included in our regressions. Our final

dataset comprises 225,019 observations (62,652 individuals) with 59,604 (26.5 percent) observations

referring to self-employment. Table 1 presents some descriptive information.

--- Insert Table 1 about here ---

Table 1 reveals that participation of females in the labor market is rather low, especially with respect

to participation in self-employment. Self-employed individuals are on average 7 years older than their

paid counterparts. Furthermore, paid employees have received higher levels of education than self-

employed individuals. Concerning business sectors, our descriptive results show how self-employment

is the natural employment status in the agricultural industries. Finally, on average, self-employed

individuals work 10 hours longer, earn €1,900 less and present more unequal incomes (22.01 against

9.46 in terms of standard deviation for annual earnings) as compared to paid employees.

1 ECHP data are used with the permission of Eurostat (contract ECHP/2006/09 with the Universidad de Huelva). 2 Information concerning job satisfaction for Sweden was not collected. 3 See Peracchi (2002) for a review of the organization of the survey, and a useful discussion of the issues a researcher may

face when using these data. 4 Individuals are forced to choose only one main occupation, either working for an employer in paid employment, or working

as a self-employed. Since no information is collected about secondary activities, we cannot identify whether some

individuals combine both self- and paid employment. When running our estimations, however, the exclusion of part-time

workers (who might combine both activities) does not affect our results in any significant way. Therefore, our results

seem to be robust to the presence of these special cases. 5 We exclude workers in the public sector from the analysis because determinants of occupational choice and job satisfaction

among public sector workers deviate from those of private sector workers. This is related to several factors such as a

relatively lower workload for public sector workers and a motivation to serve the community (Francois, 2000; Glazer,

2004; Besley and Ghatak, 2005; Prendergast, 2007; Delfgaauw and Dur, 2008, 2009).

8

Reported levels of job satisfaction among self-employed and paid employed individuals are presented

in table 2.

--- Insert Table 2 about here ---

Table 2 shows that on average self-employed individuals report higher levels of satisfaction with the

type of work and lower levels of satisfaction with job security than their paid employee counterparts.

These figures, however, do not hold for some countries. In France and Greece, for example, the

percentage of respondents that report high job satisfaction with regard to the type of work is lower for

the self-employed as compared to the paid employed. Also, self-employed individuals in Denmark,

Germany, Italy and Portugal report having a high level of satisfaction with respect to job security more

often than paid employees.6

Methodology and dependent variables

To investigate whether the self-employed are more satisfied or less satisfied with their job in terms of

type of work and job security and to investigate determinants of the two types of job satisfaction

among the self-employed and employees, we use ordered logit models. In particular, to avoid violation

of the proportional odds assumption (also called parallel regressions assumption, or parallel lines

assumption) we apply generalized ordered logit models.7

Within this framework, an individual’s self-reported job satisfaction (sati) is interpreted as an ordinal

indicator of a latent wellbeing variable (WBi), which is unobservable. Our dependent variables are job

satisfaction in terms of type of work and job satisfaction in terms of job security. These variables

range from 1 to 6 and equal 1 for individuals who are not satisfied with their present job and 6 for

those being fully satisfied with their job. The dependent variable has been reclassified into three values

for job satisfaction: (1) dissatisfied, (2) neither dissatisfied nor satisfied, (3) satisfied.8 The relationship

between self-reported job satisfaction (sati) and the latent variable (WBi) is given by

(1) 11 µ≤<∞−= ii WBifsat

(2) 212 µµ ≤<= ii WBifsat

(3) +∞≤<= ii WBifsat 23 µ

where µ1 and µ2 are the thresholds of the variable WBi that divide its range into separate intervals

associated with the different levels of job satisfaction.

The generalized ordered logit model can be written as

(4) ( ))Xaexp(

)Xaexp()X(gjsatPr

jij

jij

jiβ

ββ

++

+==>

1

6 The data in table 2 indicate that it is questionable to assume uniform results across the sample of countries. Thus, in order to

test if the fit is similar across all countries (or if the results are being skewed by some idiosyncratic specifications for a

few countries), we ran separate estimations country by country and reported the results of these robustness tests in

section 4. 7 The parallel lines model is a special case of the generalized ordered model which assumes that the coefficients are equal

across categories (proportional-odds assumption -also called parallel lines assumption-). Different tests provided

evidence that the parallel regression assumption was violated and, as a consequence, demonstrate the need to apply

generalized ordered logit models. See Williams (2006) for a complete description of the methodology. 8 There are two reasons for doing this: first, in most cases, there are only few observations in the low satisfaction scales. A

second reason for recoding is that we assume that there is quite a bit of “noise” in detailed scales. This can be illustrated

using the following - much-cited - example: people usually know if they are tall or short; they may, however, have

difficulties in classifying themselves as very short or extremely short.

9

where the vector Xi represents individual and firm-specific characteristics and economic conditions;

jβ is the associated vector of coefficients to be estimated9; and ( )·g is specified as the logistic

cumulative distribution function. It can be determined that the probabilities that sati will take on each

of the values 1, 2 and 3 is equal to

(5) ( ) )X(gsatPr ii 111 β−==

(6) ( ) )X(g)X(gsatPr iii 212 ββ −==

(7) ( ) )X(gsatPr ii 23 β==

We will first explore the determinants of job satisfaction on the full sample of workers. This allows us

to test whether there are significant differences on reported job satisfaction levels between the self-

employed and the paid employed (by including a self-employed dummy). In addition, to explore

whether the determinants of job satisfaction differ for the self-employed and employees, separate

estimations are conducted for both groups of workers. Since the ECHP tracks the same individuals

from 1994 to 2001, standard errors are adjusted for intra-individual correlation to control for possible

unobserved heterogeneity.

Independent variables

Propositions-related independent variable. The individuals in our dataset give detailed information

about their main activity status. From this self-reported information, we construct our main

independent variable self-employed: a dummy taking the value 1 for those being self-employed and

taking the value 0 for those being wage employed.

Control variables. Despite being relative latecomers to the job satisfaction field (compared to

psychologists or sociologists), economists, when explaining job satisfaction, use similar explanatory

variables to those included in earning equations. In the analyses we include a large number of

individual-specific independent variables such as demographic indicators (gender and age), family

aspects and structure (cohabiting status and number of young children), educational attainment, firm-

specific indicators (firm size and sector of industry), employment characteristics (job status, type of

contract, hours of work, past spells of unemployment, and a control that captures the degree that

individuals think they have the skills or qualifications to do a more demanding job than they currently

do). Finally, we also explore the impact of several income characteristics on job satisfaction (level of

earnings, relative earnings compared to last year’s level, easiness to make ends meet). Earnings are

corrected by purchasing power parities (comparability across countries) and harmonized consumer

price indexes are used (comparability across time). Harmonized national unemployment rates from the

OECD are also included to capture the state of the various national economies in the period under

study.10

A detailed definition of our variables is presented in the Appendix.

4. RESULTS This section presents the main results of the empirical analyses. They are not directly comparable to

previous literature for two reasons. First, the existing literature including self-employment is scarce.

Second, and more importantly, previous results refer to a global measure of job satisfaction which is

9 The formulas for the parallel lines model and generalized ordered logit model are the same, except that in the parallel lines

model the Betas (but not the Alphas) are the same for all values of j. 10 Endogeneity is a potential concern when doing cross-section analysis. The reason why we did not include any time lag

between our main independent variable (self-employment dummy) and our dependent variables (job satisfaction) is that

it can be expected that the current employment position determine the assessment of job satisfaction. Also, while we

cannot rule out the possibility that the observed empirical correlation between job satisfaction and self-employment is

due to some other effect, we included a large number of potential explanatory variables to reduce potential omitted

variable bias. With respect to multicollinearity, the maximum correlation between variables is 0.39 (between hours of

work and self-employed) and variance inflations factors range from 1.07 to 3.03. Therefore, multicollinearity is not a

concern.

10

not directly comparable with our two different measures capturing separate aspects of job satisfaction

(type of work and job security). For this reason we will simply describe our results.

First, the results for the estimates of the probability of being satisfied with a present job in terms of the

type of work for all workers (both self-employed and employees) as well as for self-employed

individuals and employees separately will be presented in table 3 and discussed in subsection 4.1.

Subsequently, subsection 4.2 discusses the results of predicted probabilities for both groups of workers

using satisfaction with a present job in terms of job security as the dependent variable. The results for

these estimates are presented in table 4. In a three-column format, both table 3 and table 4 present

results for all workers (both self-employed and employees) in the first column and for paid employed

and self-employed individuals separately (in the second and third columns). At the top of each

column, the number of individuals and observations involved in the estimations are reported. Then, for

each possible level of job satisfaction (1 = dissatisfied, 2 = neither dissatisfied nor satisfied, 3 =

satisfied), predicted probabilities of job satisfaction for the sample means are shown. Below only the

effects of the explanatory variables on the probability that individuals are satisfied with their job (job

satisfaction equals 3) are presented in terms of marginal effects (and not the coefficients). These

marginal effects are expressed in relative terms (with respect to the predicted probabilities for the

sample means). Finally, t-statistics associated with marginal effects are reported in each column.

4.1 Satisfaction with present job in terms of type of work

The first column in table 3 presents results for satisfaction with the present job in terms of the type of

work as the dependent variable including all workers (both self-employed and employees). In

accordance with proposition 1, the self-employment dummy reveals that the self-employed are more

satisfied with their jobs in terms of type of work than employees.11

To be precise, we observe a 14%

increase of the probability of being satisfied with the type of work in case of being self-employed. The

magnitude of this marginal effect justifies a separate analysis for self-employed individuals and

employees, which is presented in the second and third columns of table 3. We will now present results

that follow from these two columns.

--- Insert Table 3 about here ---

With respect to demographic characteristics, a number of factors such as gender and cohabitation

status do not matter for determining job satisfaction for either the paid employed or the self-employed.

Furthermore, the findings indicate that for both groups of workers the relationship between age and the

probability of being satisfied seems to be non-linear, showing a U-shaped pattern which reaches the

lower probability at the age of 40 for employees and at the age of 46 for the self-employed.

Regarding education, the findings indicate that education matters among both groups of workers in the

sense that those who received secondary schooling or university education are more likely to be

satisfied with the type of work as compared to those who received only primary education or no

schooling at all. This effect is especially relevant in the case of self-employed individuals. For self-

employed individuals with a university education, the predicted probability of being satisfied with the

type of work increases by approximately 33%, while the increase amounts to only 9% for employees.

Several employment characteristics are considered. For both groups of workers, those working in

agriculture are less likely to be satisfied with the type of work (in comparison to individuals working

in other industries). This effect is stronger for self-employed individuals than for employees.

Regarding firm size, we find that those employees working in micro, small and medium-sized firms

are more likely to be satisfied with the type of work than those working in large firms (> 99

employees). For self-employed individuals, however, being a self-employed individual without

employees marginally reduces the likelihood of being satisfied, compared with those who hire

11 When running these estimations country by country as robustness tests, the same results persist for all countries except for

France, Greece and the UK where being self-employed (as opposed to being paid employed) does not seem to alter the

likelihood of being satisfied with the type of work. These additional estimations are not reported for brevity, and are

available upon request.

11

employees. Furthermore, employees having a supervisory or an intermediate job status (as compared

to having a non-supervisory role) are more likely to be satisfied. Also, employees with indefinite

contracts are more likely to be satisfied in terms of type of work. When employees work longer hours,

this displays a negative (non-linear) association with satisfaction with the type of work. Conversely,

when self-employed individuals work longer hours, this displays a positive (non-linear) association

with satisfaction with the type of work. It appears that a recent unemployment (after 1989) experience

decreases satisfaction with the type of work for all workers (both employees and the self-employed).

Furthermore, those employees who think they have the skills or qualifications to do a more demanding

job than they currently do are less likely to be satisfied with the type of work. The same does not hold

true, however, for self-employed individuals.

We also explored the impact of several income characteristics on job satisfaction. For both employees

and the self-employed, having higher relatively earnings compared to last year, coming from

households that more easily make ends meet and having higher work incomes increases the likelihood

of being satisfied with the type of work.

Regarding the impact of the state of the various national economies, it can be seen that when countries

have higher unemployment rates, both employees and self-employed individuals are more likely to be

satisfied with the type of work they do.

Finally, we also included country dummies using Spain as the reference category. There are hardly

any differences between the results for employees and the self-employed. In general, it can be

observed that workers from Austria, The Netherlands, Ireland Denmark, and Luxembourg are more

likely to report high levels of satisfaction with the type of work than workers from other countries

within the EU-15. The reverse is true for workers from Greece, Portugal and Italy.

4.2 Satisfaction with present job in terms of job security

As explained above, we focus not only on job satisfaction in terms of type of work but also on

satisfaction in terms of job security. Table 4 displays the results for satisfaction with the present job in

terms of job security as the dependent variable. In line with our second proposition, we find that the

self-employed are less likely to be satisfied with their present job in terms of job security than paid

employees.12

Our results show that for self-employed individuals, the probability of being satisfied

with job security decreases by 9%, which supports the need to run separate analyses for the self-

employed and employees. The discussion of these independent estimations is reported below.

--- Insert Table 4 about here ---

Regarding demographic characteristics, females (both the self-employed and employees) are

significantly more likely to be satisfied in terms of job security than men. Also both middle-aged

employees and the self-employed are less likely to be satisfied in terms of job security, reaching the

lower probability of being satisfied at the age of 43. Cohabiting is positively related to satisfaction in

terms of job security for paid employees, while it does not seem to have an impact on satisfaction with

job security for self-employed individuals. The findings also illustrate that for both the self-employed

and employees, the number of children under 14 does not seem to be related to satisfaction in terms of

job security.

Educational attainment does not matter in determining job satisfaction with the type of work for the

self-employed. However, we find that those employees with university studies (as compared to those

who received only primary education or no schooling) are less likely to be satisfied in terms of job

security.

12 The same analysis was performed country by country as a robustness test. The only deviation from the norm concerns

Italian paid employees, which present lower levels of satisfaction with job security than their self-employed

counterparts. In addition, our results do not reveal any effect of being self-employed (as opposed to being paid

employed) on the likelihood of being satisfied with job security for Denmark, Germany, Portugal and the UK. These

additional estimations are available upon request.

12

Regarding employment characteristics, workers in the construction sector are less likely to be satisfied

with their jobs in terms of job security as compared to workers in any other industry. Furthermore,

those employees working in small firms (5-19 employees) are more likely to be satisfied in terms of

job security than those in firms of different size. Additionally, self-employed individuals with no

employees (own-account workers) and self-employed individuals of firms with less than four

employees are less likely to be satisfied in terms of job security than self-employed individuals of

larger firms. Also, both having a supervisory and having an intermediate job status (as compared to

having a non-supervisory job position) increases the probability of being satisfied in terms of job

security for employees. Having an indefinite contract is the strongest predictor of satisfaction with job

security for employees. The probability of being satisfied with job security increases by approximately

64% for paid employees with an indefinite contract. When self-employed individuals work longer

hours, this increases job satisfaction with job security (at a decreasing rate). The reverse is true for

paid employees. Furthermore, those who feel that they have the skills or qualifications to do a more

demanding job than they currently do are less likely to be satisfied in terms of job security. The same

applies to those who have been recently unemployed.

Regarding income, higher relative earnings, a household of making ends meet as well as individual

work income are positively related to job security. This is true for both employees and self-employed

individuals.

With regard to the impact of the state of the various national economies, it appears that a country’s

unemployment rate has a negative association with job satisfaction in terms of job security.

Finally, with respect to the existence of country-specific effects (and using Spain as the reference

category), again only minor differences are detected between the paid employed and the self-

employed. Overall, we find that workers in Austria, Denmark, Ireland and Finland are more likely to

be satisfied with their jobs in terms of job security than workers from other countries within the EU-

15. The reverse is true for workers from Portugal, Greece, Italy, France, Germany and the UK.

5. CONCLUSION AND DISCUSSION A large European data set is used to analyze determinants of job satisfaction distinguishing self-

employed and paid employees. The main finding is that self-employed report significantly higher

levels of satisfaction with the type of work they do, while paid employees report significantly higher

levels of satisfaction in terms of job security, even when controlling for a large number of individual

and job-related characteristics.

That self-employed are more likely than paid employees to be satisfied with the type of work is

probably related to the independence and flexibility that self-employed enjoy as they are not working

for a boss. Self-employment has advantages in providing autonomy as compared to paid employment.

Self-employed are in charge and therefore capable of (re)defining their work. This suggests that

introducing entrepreneurial aspects (i.e. autonomy, independence, etc.) to paid employed jobs may

help to increase job satisfaction of paid employees with type of work. Indeed, this seems to be in line

with our result that employees with supervisory positions are more satisfied. Even though self-

employed indeed often have substantial freedom in creating and shaping their type of work, we can

not rule out the possibility that people who tend to be enthusiastic about their type of work are those

who self-select into self-employment. Other factors may, however, also be at play here. Self-employed

who have been pushed into self-employment because they have no alternative employment options,

for example, may simply be more satisfied as a result of lower expectations, for instance because they

had no jobs or worse jobs in the past.

The finding that self-employed have a lower probability than employees to be satisfied with job

security probably follows, as we argued before, from the reality that self-employed, on average, have

more limited employment protection than employees and that for self-employed the risk to fail is

higher than the risk to become unemployed for employees. Another factor that possibly plays a role in

13

explaining differences in the assessment of job security between self-employed and employees is that

it may be more difficult for self-employed to predict the extent of job security that they will derive

from their own business than it is for employees who are working under a written contract. Thus,

while job security circumstances are rather well defined for employees meaning that they more or less

know what to expect beforehand, it is very well possible that the expectations that self-employed have

in advance about the security that they will get from their own business deviate from their actual job

security. Self-employed, for example, may obtain security from the belief that they can shape their

own future, which could result in positive expectations about their ability to (re)define their business

to meet threats and to ensure survival (Hundley, 2001). When such positive prior expectations are not

met in practice it could negatively affect self-employed’s evaluation of their job security as a result of

the substantial gap between positive prior expectations and the actual situation. Thus, possibly

employees are more likely to be satisfied in terms of job security than self-employed, because they

face a lower gap between expected and actual job security. The ability to predict the extent of job

security beforehand is further complicated by the fact that job security is also likely to be more

variable for self-employed as it may differ substantially from one year to another depending on the

specific circumstances and challenges that they encounter with their business.

Our findings underline the importance of education, especially among self-employed, for increasing

one’s opportunities for finding an interesting job in terms of type of work. Education, however,

appears to be no determining factor for satisfaction with job security among self-employed. This

seems to suggest that having a higher level of education does not help to reduce the (perceived) risk of

business failure. Furthermore, among employees those having university studies are even less likely to

be satisfied in terms of job security than those who have only primary education or no education.

Possibly employees with university studies have more demanding jobs and have to meet higher

expectations, which makes it more challenging for them to be able to keep their job.

Looking at firm size, it appears that employees who work in micro, small, and medium-sized firms are

more likely to be satisfied with the type of work than those working in larger firms. This may imply

that employees in smaller firms have more freedom and independence in shaping the type of work

they do than those in larger firms. For the self-employed, those who have five or more employees are

more likely to be satisfied with job security than those who have no employees or less than five

employees. This may indicate that self-employed individuals associate having at least some employees

with better survival and growth prospects of the business, which in turn positively affects their

perception of job security.

One distinguishing feature between self-employment and paid employment is that self-employment

provides for greater skill utilization (Hundley, 2001). Previous results for Portugal provide evidence

that job satisfaction with type of work and job security is adversely affected by perceived skill

underutilization (Allen and van der Velden, 2001; Vieira, 2005). With respect to satisfaction with type

of work, however, our results do not indicate an adverse impact of skill mismatches among the group

of self-employed. This indicates that, even when self-employed consider they have the skills to do a

more demanding job, which potentially might push down job satisfaction, the advantages of self-

employment may compensate for such a negative effect.

A consistent finding is that individuals with better financial positions (both the self-employed and

employees) are more likely to be satisfied with their type of work as well as with job security. For

employees this might mean that better paying jobs are also the ones that provide nice work content.

Furthermore, with respect to job security, it could mean that the better paying jobs are also the more

secure jobs and/or that having a better financial position makes you less worried about job security as

you are able to take some financial losses in case you lose your jobs. For self-employed, the positive

relationship between financial position and the two types of job satisfaction suggests that having a

better financial position improves the ability of self-employed to shape the content of the work they do

(i.e. they can be a bit more critical in accepting or rejecting assignments) as well as their ability to

survive and perform well with their business.

14

Self-employed are distinguished by the effort they put in their work. We even find that among self-

employed working more hours is associated with being more satisfied with type of work and job

security. For both types of job satisfaction, however, it is found that when paid employed individuals

work longer hours they are less likely to be satisfied. Possibly working longer hours is more of a free

choice for the self-employed than for employees and results in positive returns or benefits for the self-

employed.

Another consistent finding among both the self-employed and employees is that those who have

experienced recent spells of unemployment tend to be less satisfied with their jobs both in terms of

type of work and job security.13

Probably these individuals have more limited choices for finding

satisfying jobs and are also more aware of the risks of losing one’s job. Furthermore, this negative

effect of previous spells of unemployment is particularly strong in the case of satisfaction with job

security for self-employed individuals, which suggests they are particularly insecure about their

chances of survival. Governments may want to consider this when designing their policy initiatives to

encourage the unemployed to enter into self-employment, which are present in many countries (Shutt

and Sutherland, 2003; Kluve and Card, 2007).

One final result that we would like to highlight is that national unemployment rates relate positively to

job satisfaction in terms of type of work, while these relate negatively to satisfaction in terms of job

security. The first finding may reflect that, in case of high unemployment rates, people are simply

happy not to be unemployed and therefore report higher levels of satisfaction with the type of work

they do. The latter finding implies that, when unemployment rates are higher, job conditions may

worsen and people may also be more aware of the risk of losing their job and hence report lower levels

of satisfaction with their job in terms of job security.

Although this work highlights the importance of considering different aspects of job satisfaction (type

of work and job security) when comparing self-employed and paid employees, we acknowledge some

limitations of our study. For example, we rely on self-reported measures of job satisfaction derived

from answers to subjective questions that may be perceived differently by people in different countries

(Lévy-Garboua and Montmarquette, 2004; Kristensen and Johansson, 2008). Blanchflower and

Freeman (1994) stress that people in one country may “scale” responses differently than those in

another. For instance, Americans may be relatively optimistic, with an “everything will work out”

mentality that leads people with the same true satisfaction on some objective scale to respond more

positively to a “Are you satisfied with your job?” question than the British who tend to be more

reserved. Furthermore, the current analysis does not allow us to isolate directions of causality. Lastly,

we only focus on entrepreneurship in terms of self-employment and do not consider other approaches

that define entrepreneurs as a heterogeneous group such as: (i) innovative against imitative

entrepreneurs (Schumpeter, 1912); (ii) opportunity against necessity entrepreneurs (Reynolds, Camp,

Bygrave, Autio and Hay, 2002); (iii) the distinction between several engagement levels of the

entrepreneurial process (Grilo and Thurik, 2008; Van der Zwan, Thurik and Grilo, 2010); and (iv) the

distinction between self-employed with employees and the own-account workers (Earle and Sakova,

2000; Millán, Congregado and Román, 2011b).

Lastly, we would like to highlight a number of avenues for future research, such as whether or not

higher levels of job satisfaction are associated with higher levels of economic utility over time.

Furthermore, future research could help to establish whether different aspects of job satisfaction affect

the occupational choice between self-employment and paid employment. Previous studies have

provided evidence of job dissatisfaction as a reason for new venture creation (Hisrich and Brush,

1986; Brockhaus, 1980; Cromie and Hayes, 1991). Finally, it is interesting to consider the influence of

various labor market institutional factors such as employment protection legislation, unionism and

active labor market policies on several types of job satisfaction.

13 Previous research reports that those entrepreneurs with previous unemployment experience are less likely to survive as

entrepreneurs (Van Praag, 2003; Millán, Congregado and Román, 2011a). Similarly, other studies indicate that push

entrepreneurs are less successful, both in terms of venture success (sales per employee) and personal income than pull

entrepreneurs (Amit and Muller, 1995).

15

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18

TABLES

Table 1. Descriptive statistics Group All workers Paid employees Self-employed

Number of observations 225,059 165,455 59,604

Number of individuals 62,652 48,983 17,363

Job Satisfaction with type of work

JS with type of work = 1 7.49% 7.14% 8.46%

JS with type of work = 2 40.17% 39.97% 40.75%

JS with type of work = 3 52.34% 52.89% 50.79%

Job Satisfaction with job security

JS with job security = 1 13.43% 12.67% 15.54%

JS with job security = 2 41.87% 40.73% 45.04%

JS with job security = 3 44.70% 46.61% 39.42%

Demographic characteristics

Female 34.89% 37.6% 27.39%

Age (18-65) 39.05 (11.25) 37.23 (10.78) 44.09 (10.99)

Cohabiting (2) 73.45% 70.54% 81.52%

Children under 14 0.62 (0.9) 0.61 (0.89) 0.63 (0.93)

Education

No education or primary education 49.25% 46.34% 57.35%

Secondary education 35.07% 37.51% 28.3%

University studies 15.68% 16.16% 14.35%

Employment characteristics

Agricultural sector 10.17% 3.2% 29.5%

Industrial sector 26.86% 32.64% 10.8%

Construction sector 11.02% 11.12% 10.76%

Services sector 51.95% 53.03% 48.94%

No employees 52.51%

Micro firm (1-4 employees) 17.57% 35.96%

Small firm (5-19 employees) 42.01% 10.2%

Medium-sized firm (20-99

employees) 10.41% 0.59%

Large firm (> 99 employees) 30.01% 0.74%

Hours of work 42.63 (11.88) 39.89 (8.92) 50.26 (15.27)

Indefinite contract 82.8%

Intermediate 14.45%

Supervisory 10.76%

Recent spell(s) as unemployed 35.23% 40.26% 21.28%

Considers herself better skilled 50.69% 53.79% 42.1%

Incomes

Income situation (1-5) 2.95 (0.86) 3 (0.86) 2.82 (0.84)

Ends meet (1-6) 3.44 (1.21) 3.49 (1.21) 3.29 (1.18)

Annual earnings t-1 ('000) 12.2 (13.96) 12.69 (9.46) 10.82 (22.01)

Country

Austria 6.88% 7.54% 5.02%

Belgium 3.83% 4.34% 2.41%

Denmark 4.61% 5.51% 2.11%

Finland 4.63% 4.38% 5.31%

France 5.94% 7.5% 1.58%

Germany 3.54% 4.27% 1.51%

Greece 10.53% 6.77% 20.98%

Ireland 5.75% 5.52% 6.38%

Italy 14.44% 12.73% 19.19%

Luxembourg 0.86% 1% 0.47%

Netherlands 8.57% 10.88% 2.16%

Portugal 14.17% 13.59% 15.78%

Spain 14.58% 14.52% 14.76%

United Kingdom 1.67% 1.43% 2.33%

Note: standard deviations for continuous explanatory variables in parentheses

19

Table 2 Percentage of observations reporting high satisfaction levels

(Job satisfaction is high: JS=3)

Job satisfaction with Type of work Job security

Country All

workers Paid

employees Self-

employed All

workers Paid

employees Self-

employed

Austria 77.67% 77.08% 80.11% 67.94% 68.05% 67.45%

Belgium 62.03% 59.94% 72.48% 53.12% 54.12% 48.16%

Denmark 71.75% 70.01% 84.39% 65.95% 65.71% 67.68%

Finland 54.5% 52.21% 59.75% 53.11% 56.4% 45.56%

France 62.77% 62.96% 60.28% 40.69% 41.14% 34.75%

Germany 59.74% 57.39% 78.25% 48.06% 47.62% 51.5%

Greece 27.71% 28.59% 26.92% 24.67% 25.16% 24.22%

Ireland 70.14% 65.87% 80.39% 59.6% 60.53% 57.37%

Italy 45.94% 41.96% 53.28% 38.53% 36.6% 42.07%

Luxembourg 70.03% 67.87% 82.86% 63.8% 65.22% 55.36%

Netherlands 71.54% 70.47% 86.51% 64.6% 65.11% 57.52%

Portugal 30.08% 29.56% 31.32% 23.88% 23.09% 25.76%

Spain 50.48% 48.65% 55.46% 45.07% 45.9% 42.81%

United Kingdom 60.21% 56.78% 66.07% 44.97% 46.39% 42.56%

Unweighted average 58.19% 56.38% 65.58% 49.57% 50.08% 47.34%

20

Table 3 Job satisfaction with type of work

-Generalized Ordered Logit estimations- Group All workers Paid employed Self-employed

Total # ind. 62,652 48,983 17,363

Total # obs. 225,059 165,455 59,604

Prob (JS = 1) 0.0536 0.0503 0.0549

Prob (JS = 2) 0.4196 0.4159 0.4318

Prob (JS = 3) 0.5268 0.5338 0.5132

Variables Marg.

Eff. (%) t-stat.

Marg.

Eff. (%) t-stat.

Marg.

Eff. (%) t-stat.

Self-employed (1) 14.15% 16.63***

Demographic characteristics

Female -1.51% -2.07** -0.17% -0.21 -1.8% -1.19

Age (18-65) -0.02% -0.09 -1.05% -4.32*** -1.19% -2.74***

Age (squared) 0.0009% 0.39 0.0134% 4.38*** 0.0131% 2.68***

Cohabiting (2) -0.66% -0.84 -0.81% -0.93 -2.44% -1.39

Children under 14 0.65% 1.75* 0.7% 1.66* -0.65% -0.86

Education

Secondary education (3) 11.09% 15.86*** 7.01% 8.93*** 15.02% 9.9***

University studies (3) 18.74% 19.98*** 9.3% 8.62*** 32.52% 16.35***

Employment characteristics

Agricultural sector (4) -18.35% -12.96*** -4.83% -2.2** -22.95% -9.82***

Industrial sector (4) 1.72% 1.61 1.28% 1.07 14.64% 5.69***

Services sector (4) 8.09% 7.97*** 8.08% 6.94*** 5.44% 2.63***

No employees (5) -3.38% -1.63

Micro firm (1-4 emp.) (5) 8.31% 7.78*** 0.07% 0.04

Small firm (5-19 emp.) (5) 6.35% 7.3***

Medium-sized firm (20-99 emp.) (5) 2.92% 2.54**

Intermediate (6) 16.93% 19.33***

Supervisory (6) 27.11% 24.18***

Indefinite contract 14.17% 16.35***

Hours of work 0.2% 1.95* -0.45% -3.07*** 0.87% 4.89***

Hours of work (squared) 0.0009% 0.88 0.0055% 3.28*** -0.0048% -2.97***

Recent spell(s) as unemployed -8.23% -11.71*** -6.26% -8.02*** -9.37% -5.87***

Considers herself better skilled -9.96% -17.35*** -13.5% -20.67*** -1.03% -0.87

Incomes

Income situation (1-5) 3.79% 12.52*** 3.95% 11.58*** 3.55% 5.52***

Ends meet (1-6) 8.11% 28.82*** 6.5% 20.33*** 10.77% 18.62***

Annual earnings t-1 ('000) 0.56% 13.97*** 0.53% 8.75*** 0.29% 5.52***

Business cycle

Unemployment rate (%) 0.76% 6.03*** 0.66% 4.52*** 1.1% 4.24***

Country

Austria (7) 55.6% 38.92*** 49.4% 29.4*** 65.37% 21.92***

Belgium (7) 12.66% 6.89*** 8.77% 4.34*** 19.18% 4.26***

Denmark (7) 36.18% 20.24*** 30.38% 15.25*** 61.06% 14.75***

Finland (7) 2.68% 1.75* -3.21% -1.82* 11.36% 3.58***

France (7) 22.68% 15.47*** 18.92% 12.01*** 3.9% 0.95

Germany (7) 9.91% 5.68*** 5.92% 3.13*** 27.23% 5.5***

Greece (7) -41.83% -32.43*** -33.7% -20.11*** -48.35% -20.93***

Ireland (7) 36.48% 25.46*** 25.9% 15.01*** 59.07% 22.83***

Italy (7) -9.39% -7.48*** -16.43% -11.29*** -5.37% -2.15**

Luxembourg (7) 29.69% 9.55*** 22.68% 6.59*** 51.1% 6.87***

Netherlands (7) 36.8% 22.52*** 30.1% 16.19*** 69.22% 22.83***

Portugal (7) -25.17% -15.02*** -28.25% -14.9*** -24% -6.94***

United Kingdom (7) 13.66% 6.56*** 9.01% 3.82*** 15.43% 3.52***

Log pseudolikelihood -181,885.49 -132,918.01 -47,032.132

Reference categories: (1) Paid employed, (2) Non-cohabiting individuals, (3) No education or primary education, (4)

Construction sector, (5) For paid employees the reference category is large firm (> 99 employees). For self-employed the

reference category is small, medium-sized and large firm (> 4 employees), (6) Non-supervisory, (7) Spain.

Note: *** denotes significance at 1% level; ** denotes significance at 5% level; * denotes significance at 10% level.

21

Table 4 Job satisfaction with job security

-Generalized Ordered Logit estimations- Group All workers Paid employed Self-employed

Total # ind. 62,652 48,983 17,363

Total # obs. 225,059 165,455 59,604

Prob (JS = 1) 0.1087 0.922 0.1278

Prob (JS = 2) 0.4516 0.4546 0.4922

Prob (JS = 3) 0.4397 0.4532 0.38

Variables Marg.

Eff. (%) t-stat.

Marg.

Eff. (%) t-stat.

Marg.

Eff. (%) t-stat.

Self-employed (1) -9.02% -9.1***

Demographic characteristics

Female 6.46% 7.38*** 6.39% 6.42*** 8.16% 4.5***

Age (18-65) -2.16% -9.13*** -4.45% -15.48*** -3.11% -5.89***

Age (squared) 0.0263% 9.14*** 0.0525% 14.57*** 0.0354% 5.99***

Cohabiting (2) 2.89% 3.25*** 1.95% 1.85* 0.01% 0.01

Children under 14 0.5% 1.19 0.41% 0.85 0.21% 0.24

Education

Secondary education (3) 1.84% 2.28** -1.41% -1.57 -2.11% -1.16

University studies (3) 0.45% 0.4 -5.6% -4.62*** -0.97% -0.39

Employment characteristics

Agricultural sector (4) 15.54% 8.78*** 13.7% 5.01*** 29.03% 10.34***

Industrial sector (4) 13.08% 9.76*** 5.73% 4.03*** 24.16% 7.64***

Services sector (4) 19.48% 15.48*** 15.46% 11.66*** 19.64% 7.78***

No employees (5) -20.62% -8.19***

Micro firm (1-4 emp.) (5) 0.96% 0.77 -7.35% -2.98***

Small firm (5-19 emp.) (5) 2.63% 2.7***

Medium-sized firm (20-99 emp.) (5) 1.05% 0.78

Intermediate (6) 18.58% 17.35***

Supervisory (6) 20.87% 14.64***

Indefinite contract 64.42% 75.18***

Hours of work 0.4% 3.29*** -1.04% -5.86*** 1.14% 5.2***

Hours of work (squared) -0.0002% -0.15 0.0115% 5.71*** -0.0046% -2.31**

Recent spell(s) as unemployed -22.71% -28.2*** -14.23% -15.69*** -22.79% -12.79***

Considers herself better skilled -3.56% -5.25*** -3.61% -4.66*** -6.08% -4.48***

Incomes

Income situation (1-5) 6.66% 18.6*** 6.34% 15.58*** 9.98% 12.14***

Ends meet (1-6) 11.72% 35.11*** 7.92% 20.78*** 19.49% 27.29***

Annual earnings t-1 ('000) 0.87% 16.57*** 0.71% 10.1*** 0.35% 5.65***

Business cycle

Unemployment rate (%) -1.8% -12.13*** -1.9% -10.97*** -1.02% -3.19***

Country

Austria (7) 25.76% 10.76*** 2.06% 0.78 42.91% 7.02***

Belgium (7) -10.86% -5.09*** -26% -11.83*** -15.47% -3***

Denmark (7) 15.2% 6.06*** -4.38% -1.66* 44.71% 5.71***

Finland (7) 3.27% 1.89* -6.53% -3.32*** -5.66% -1.57

France (7) -25.73% -15.7*** -43.84% -28.38*** -30.24% -6.19***

Germany (7) -25.14% -13.16*** -39.13% -20.57*** -15.12% -2.7***

Greece (7) -50.3% -38.71*** -55.07% -36.31*** -47.73% -18.5***

Ireland (7) 11.89% 6.19*** -2.92% -1.35 17.14% 4.14***

Italy (7) -25.83% -18.95*** -47.2% -35.73*** -11.94% -4.09***

Luxembourg (7) -9.27% -2.39** -23.38% -5.86*** -25.37% -2.85***

Netherlands (7) 1.89% 0.84 -15.4% -6.49*** 9.79% 1.5

Portugal (7) -60.56% -40.16*** -74.22% -49.79*** -50.39% -14.93***

United Kingdom (7) -22.26% -9.85*** -37.74% -15.98*** -15.85% -3.33***

Log pseudolikelihood -203,212.58 -142,042.81 -54,810.576

Reference categories: (1) Paid employed, (2) Non-cohabiting individuals, (3) No education or primary education, (4)

Construction sector, (5) For paid employees the reference category is large firm (> 99 employees). For self-employed the

reference category is small, medium-sized and large firm (> 4 employees), (6) Non-supervisory, (7) Spain.

Note: *** denotes significance at 1% level; ** denotes significance at 5% level; * denotes significance at 10% level.

22

APPENDIX: DESCRIPTION OF VARIABLES

Dependent variables

Job satisfaction with type of work

Dependent variable varies from 1 to 3 showing a scale of job satisfaction

with present job in terms of type of work. Thus, this variable equals 1 for

individuals who are not satisfied with their present job and 3 for satisfied

individuals.

Job satisfaction with job security

Dependent variable varies from 1 to 3 showing a scale of job satisfaction

with present job in terms of job security. Thus, this variable equals 1 for

individuals who are not satisfied with their present job and 3 for satisfied

individuals.

Explanatory variables Self-employment

Self-employed Dummy equals 1 for self-employed individuals.

Demographic characteristics

Female Dummy equals 1 for females.

Age Age reported by the individual, ranging from 18 to 65.

Cohabiting Dummy equals 1 for cohabiting individuals.

Education

No education / primary education Dummy equals 1 for individuals with less than second stage of secondary

education (ISCED 0-2).

Secondary education Dummy equals 1 for individuals with second stage of secondary level

education (ISCED 3).

University studies Dummy equals 1 for individuals with recognized third level education

(ISCED 5-7).

Employment characteristics

Agricultural sector

Dummy equals 1 for individuals whose codes of main activity of the local

unit of the business is A (Agriculture, Hunting and Forestry) and B

(Fishing), by the “Nomenclature of Economic Activities” (NACE-93).

Construction sector

Dummy equals 1 for individuals whose codes of main activity of the local

unit of the business is F (construction), by the “Nomenclature of Economic

Activities” (NACE-93).

Industrial sector

Dummy equals 1 for individuals whose codes of main activity of the local

unit of the business are C (mining and quarrying), D (manufactures) and E

(electricity, gas and water supply), by the “Nomenclature of Economic

Activities” (NACE-93).

Services sector

Dummy equals 1 for individuals whose codes of main activity of the local

unit of the business are G (wholesale and retail trade; repair of motor

vehicles, motorcycles and personal/household goods), H (hotels and

restaurants) and I (transport, storage and communication), J (Financial

intermediation) and K (real estate, renting and business activities), L (public

administration and defense; compulsory social security), M (education), N

(health and social work) and O-Q (other community, social and personal

service activities; private households with employed persons; extra-

territorial organizations and bodies), by the “Nomenclature of Economic

Activities” (NACE-93).

No employees Dummy equals 1 for own-account workers individuals (0 employees).

Micro firm (1-4 emp.) Dummy equals 1 for individuals working in very small firms (1-4

employees).

Small firm (5-19 emp.) Dummy equals 1 for individuals working in small firms (5-19 employees).

Medium-sized firm (20-99 emp.) Dummy equals 1 for individuals working in medium-sized firms (20-99

employees).

Large firm (> 99 emp.) Dummy equals 1 for individuals working in large firms (> 99 employees).

Non-supervisory Dummy equals 1 for individuals whose job status is non-supervisory.

Intermediate Dummy equals 1 for individuals whose job status is intermediate.

Supervisory Dummy equals 1 for individuals whose job status is supervisory.

23

Hours of work Hours of work per week.

Indefinite contract Dummy equals 1 for workers with indefinite contract.

Recent spell(s) as unemployed Dummy equals 1 for individuals with previous spell(s) as unemployed after

1989.

Considers herself better skilled Dummy equals 1 for individuals who feel they have the skills or

qualifications to do a more demanding job than the one they have.

Incomes

Income situation

Variable varies from 1 to 5 showing a scale of income situation compared to

last year. Thus, this variable equals 1 for households with relative income

situation clearly deteriorated and 5 for households with relative income

situation clearly improved.

Ends meet

Variable varies from 1 to 6 showing a scale of ability to make ends meet.

Thus, this variable equals 1 for households with great difficulty in making

ends meet, and 6 for households that very easily make ends meet.

Annual earnings t-1 (‘000)

Net work incomes, either from paid employment or self-employment,

earned during period t-1, converted to thousands of average euros of 1996,

having been corrected by Harmonized Consumer Price Index. Furthermore,

these incomes are corrected by Purchasing Power Parity (across countries).

Business cycle

Unemployment rate Harmonized annual unemployment rate (source: OCDE).

Country dummies

Dummies equal 1 for individuals living in the named country, and 0 otherwise. The following countries are

included: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,

Netherlands, Portugal, Spain and United Kingdom.

24

The results of EIM's Research Programme on SMEs and Entrepreneurship are published in

the following series: Research Reports and Publieksrapportages. The most recent

publications of both series may be downloaded at: www.entrepreneurship-sme.eu.

Recent Research Reports and Scales Papers

H201105 13-1-2011 Gender, risk aversion and remuneration policies of

entrepreneurs

H201104 11-1-2011 The relationship between start-ups, market mobility

and employment growth: An empirical analysis for

Dutch regions

H201103 6-1-2011 The value of an educated population for an individual's

entrepreneurship success

H201102 6-1-2011 Understanding the Drivers of an 'Entrepreneurial'

Economy: Lessons from Japan and the Netherlands

H201101 4-1-2011 Environmental sustainability and financial performance

of SMEs

H201022 16-11-2010 Prevalence and Determinants of Social

Entrepreneurship at the Macro-level

H201021 20-10-2010 What determines the volume of informal venture

finance investment and does it vary by gender?

H201019 9-8-2010 Measuring Business Ownership Across Countries and

Over Time: Extending the COMPENDIA Data Base

H201018 6-7-2010 Modelling the Determinants of Job Creation:

Microeconometric Models Accounting for Latent

Entrepreneurial Ability

H201016 29-4-2010 The Nature and Prevalence of Inter-Organizational

Project Ventures: Evidence from a large scale Field

Study in the Netherlands 2006-2009

H201015 27-4-2010 New Firm Performance: Does the Age of Founders

Affect Employment Creation?

H201014 1-4-2010 Van defensief MKB-beleid naar offensief

ondernemerschapsbeleid

H201013 16-3-2010 Human capital and start-up succes of nascent

entrepreneurs

H201012 16-3-2010 New business creation in the Netherlands

H201011 16-3-2010 Factors influencing the entrepreneurial engagement of

opportunity and necessity entrepreneurs

H201010 16-3-2010 The more business owners the merrier? The role of

tertiary education

H201009 2-3-2010 Open, distributed and user-centered: Towards a paradigm

shift in innovation policy

H201008 1-2-2010 Geographical distance of innovation collaborations

H201006 21-1-2010 Family ownership, innovation and other context variables

as determinants of sustainable entrepreneurship in SMEs:

An empirical research study

H201005 12-1-2010 Intrapreneurship – An international study

H201004 12-1-2010 Schumpeter versus Kirzner:

An empirical investigation of opportunity types

H201003 7-1-2010 Institutions and entrepreneurship: The role of the rule of

law

25

H201002 5-1-2010 Patterns of innovation networking in Dutch small firms

H201001 4-1-2010 Administratieve lasten en ondernemerschap

H200911 29-1-2010 Ambitious entrepreneurship, high-growth firms and

macroeconomic growth

H200910 4-2-2010 Entrepreneurial exit and entrepreneurial engagement

H200909 10-3-2009 Entrepreneurship Education Monitor (EEM)

H200908 3-3-2009 Internationale samenwerking door het Nederlandse MKB

H200907 2-3-2009 The Dynamics of Entry and Exit

H200906 2-3-2009 Bedrijfsgrootteverdelingen in Nederland

H200905 2-3-2009 Start-ups as drivers of incumbent firm mobility: An

analysis at the region-sector level for the Netherlands

H200904 16-2-2009 Een reconstructie van het beleidsprogramma

Ondernemerschap en Starters 1982-2003: een eclectische

analyse

H200903 16-2-2009 Determinants and dimensions of firm growth

H200902 2-2-2009 The decision to innovate: Antecedents of opportunity

exploitation in high tech small firms

H200901 7-1-2009 The Relationship between Successor, Planning

Characteristics, and the Transfer Process on Post-Transfer

Profitability in SMEs

H200825 19-12-2008 Isomorfie en het beloningspakket van werknemers in het

MKB

H200824 16-12-2008 The relation between entrepreneurship and economic

development: is it U-shaped?

H200823 11-12-2008 International Entrepreneurship: An Introduction,

Framework and Research Agenda

H200822 11-12-2008 The two-way relationship between entrepreneurship and

economic performance

H200821 5-12-2008 Spin-outs

H200820 27-11-2008 Innovative Work Behavior: Measurement and Validation

H200819 17-11-2008 Open innovation in SMEs: Trends, motives and

management challenges

H200818 10-11-2008 High-Growth SMEs Evidence from the Netherlands

H200817 3-11-2008 Internationalization of European SMEs towards Emerging

Markets

H200816 27-10-2008 Measuring business dynamics among incumbent firms in

The Netherlands

H200815 20-10-2008 Vergrijzing van het arbeidsaanbod

H200814 16-10-2008 User Innovation in SMEs: Incidence and Transfer to

Producers

H200813 30-9-2008 How Does Entrepreneurial Activity Affect the Supply of

Business Angels?

H200812 16-9-2008 Science and technology-based regional entrepreneurship

in the Netherlands: building support structures for

business creation and growth entrepreneurship

H200811 8-9-2008 What Determines the Growth Ambition of Dutch Early-

Stage Entrepreneurs?

H200810 6-8-2008 The Entrepreneurial Advantage of World Cities;

Evidence from Global Entrepreneurship Monitor Data